Image copyrightAFPImage caption
Nick Clegg has written to Chancellor George Osborne in support of the proposal

There is something slightly surreal about Nick Clegg lobbying the chancellor about the methodology for the big banks' privatisation via press briefings he's been conducting on a trip to Rio.

In response the Treasury isn't falling over itself to welcome the deputy prime minister's support for a plan to transfer the state's 83% of RBS and 41% of Lloyds into the hands of voters.

A source said that of course the Treasury is "happy to listen to ideas" but "the issue doesn't arise for now".

You can see why the Treasury might be underwhelmed, quite apart from its innate mistrust of anything emanating from another bit of government that encroaches on its perceived turf.

First, privatisation in any form feels a fairly remote prospect at the moment, with the future structure of British banking yet to be decided by the Treasury, subject to final recommendations from the Independent Commission on Banking in September.

Or to put it another way, it is difficult to embark on the disposal of RBS and Lloyds until we know how much more of Lloyds might be hived off by government fiat and how far the profitability of RBS could be reduced by the ring-fence expected to be erected around the retail activities of universal banks like it.

Second, a scheme to transfer direct ownership of shares in RBS and Lloyds from the state to 50 million adults on the National Insurance register probably requires the kind of massive IT project which the public sector has a history of bungling on a world-class scale.

That said, the recent management of the sale of Olympics tickets - where there were 22 million applications for 650 events at four different price points - suggests that the IT challenge would be the equivalent of climbing Everest in trainers and shorts rather than flying to Mars in a glider.

It is not just that there would need to be an electronic record of share ownership. But it would also have to be simple for the new owners - many of whom will never have used a stockbroker - to sell shares.

And there would have to be some kind of automated funds-sweeping mechanism, such that the proceeds are split between the relevant individual and the Exchequer - because the scheme as devised would allow you, me and the 49,999,998 other new bank proprietors to scoop only those profits that may be available after the Treasury has been repaid what it invested in RBS and Lloyds.

Or to put it another way, the 50 million owners of the shares would only be winners in the marvellous casino of bank-share capitalism after the Treasury has got back the £66bn it has injected in the two sprawling, still-bruised banks.

Give that l'etat c'est nous, the state is us, you might wonder why we as individuals should not keep the entire proceeds, including the £66bn.

But that would be to forget that the national debt has been increasing at an uncomfortably fast rate since the great crash of 2008. And it is therefore tricky for the Treasury to surrender to the household sector an asset equivalent in value to around 5% of GDP.

That is why the designer of the scheme, Portman Capital, is stressing that it believes the main argument for privatising in this unprecedented way is that it would actually maximise proceeds for the Exchequer, in the short term at least - which is not as paradoxical as it may seem.

The point is that there would be a conventional £15bn stock-market sale of shares and convertible securities (what Portman calls an "exchangeable bond") as part of the privatisation - which might be done at a better price than would otherwise be the case because the big investment institutions would only have access to a portion of the government's stake.

Second, Portman is suggesting a revenue-maximising capital gains tax wheeze: capital gains tax, with no exemptions or exceptions, would be payable on any profits from share sales made by the new individual shareholders, unless those shareholders paid back to the Treasury out of their own pockets their implied bit of the £66bn the Treasury put into Lloyds and RBS (you may have to read that sentence twice for it to make any kind of sense).

Or to put it another way, there would be an incentive on the recipients of the free shares to buy the Treasury out of what it is owed.

Which means - Portman believes - that the Treasury might well receive more than £20bn of the £66bn in the first year of privatisation. Which is probably more than it would receive via a conventional route of selling billions of pounds of shares at a time.

To boil it down, there is a resonance to the idea that because taxpayers rescued Lloyds and RBS, their boards should now report to all of us and be answerable to all of us.

And on the assumption that their respective share prices were to double over the next five years there could be a windfall per adult of around £1,000 a share.

That said, it is by no means certain that the UK's adult population would ever enjoy a penny of profit, since the share prices of RBS and Lloyds are currently well below the level required even for the Treasury to get its (our) £66bn back - and the banks are sailing into strong economic and regulatory headwinds.

So the question is whether the idea of RBS and Lloyds as the people's banks will take off - whether Mr Clegg can generate sufficient popular enthusiasm for the "bank-shares-for-all" plan such that the Conservative wing of the coalition decides to ignore the logistical complexities and embrace it.

As luck would have it, the designer of the technical details of the scheme, Michael O'Connor of Portman Capital, told Radio 4's Today Programme this morning that the original idea came from a Tory, Lord Saatchi, a couple of years ago. Or to put it another way, there is an opportunity for Mr Osborne and Mr Cameron to stick a Conservative badge on the bank shares scheme, if they feel like crossing fingers and toes and praying that it won't be the mother of all IT disasters.

Update, 14:57: In the 1980s, Margaret Thatcher's Conservative government was a global pioneer of privatisation when she sold Britain's nationalised telecoms, aviation and energy companies to stock market investors.

Interestingly the Lib Dem deputy prime minister, Nick Clegg, appears to wish to be her natural successor - because the kind of privatisation he is proposing for the Treasury's huge stakes in Lloyds and Royal Bank of Scotland would be revolutionary.

In no large economy anywhere in the world have shares in companies been distributed for free to a nation's entire adult population.

And although the plan may appeal to many, as taxpayers' reward for bailing out the reckless banks in the autumn of 2008, it would be a huge logistical challenge.

In IT terms, there would be an enormous task - to register all 50 million of the new owners of RBS and Lloyds, to make it easy for shares to be sold by the millions who've never owned shares in anything, to transfer money to the Treasury as and when the shares are sold to pay back the £66bn put into Lloyds and RBS by the state.

It is those technical obstacles which in part explain why the Treasury is being cautious about idea of giving bank shares to all.

And there is something else. Right now RBS's shares are 28% below the price needed if the state is going to be repaid the funds it put into that bank, and Lloyds shares are 38% below that breakeven level.

Or to put it another way, it is not immediately obvious that if the shares were transferred to us, they'd be worth anything.